June 2004 – The OIG Discloses Issuance of Demand Letter to PharMerica Drug Systems, Inc.
Recently the OIG disclosed the issuance of a demand letter to PharMerica Drug Systems, Inc., one of the nation’s largest institutional pharmacies, seeking $21.8 million and, more importantly, a 10-year exclusion from federal healthcare programs (Medicare and Medicaid) based on alleged kickback violations. See Press Release and Demand Letter.
The implications of this letter are staggering. This is the largest amount ever sought in a civil monetary penalty action and represents a strong continuation and forceful expansion of the OIG’s enforcement activities and use of administrative sanctions.
To date the pharmaceutical industry has been under heightened scrutiny and control in a variety of areas, including qui tam actions (whistleblowers); drug pricing (AWP) investigations and settlements; DEA cases involving pharmacists, physicians, and/or patients; changes brought by new federal legislation (Sarbanes-Oxley) and proposed changes to the Federal Sentencing Guidelines; and increased coordinated investigations by State Medicaid Fraud Control Units.
It is clear that this matter impacts the pharmacy industry at a new level. Exclusion is the death knell for many companies and has not often been exerted by the OIG because of the potential impact on patient services. With a restricted provider base, access to pharmaceuticals and other services may be diminished. Moreover, this action by the OIG may be a harbinger of actions that are currently in the mix against any and all types of providers. This may be just the beginning of the end of leniency on the part of enforcement agencies when dealing with inappropriate provider and even payer activities.
In Hawaii, the implications may be even more serious. PharMerica (through a subsidiary called IPC) provides significant levels of service for many people confined to nursing homes. They provide pharmaceuticals and related services to such patients. What happens to PharMerica as this matter unfolds could impact service delivery to those patients and dictate future expectations in settlement and enforcement efforts.
Of importance to the healthcare and pharmaceutical industries:
- State and federal law enforcement agencies are more aggressively using all possible tactics to address healthcare fraud and abuse
- The tactics will certainly impact the pharmaceutical industry but could have a ripple affect across healthcare industry lines
- Exclusions within the pharmaceutical industry may impact patients, across the spectrum of healthcare delivery systems from outpatient to hospitals and nursing homes
